Save Money with a Credit Card Balance Transfer

Save Money with a Credit Card Balance Transfer

Reduce
your interest rates and make the most out of what you're paying to
your credit card company every month. Use our debt repayment
calculator to find out what you’re actually paying, because with
interest rates up in the 24% range, it's probably a lot more than you
think. Maybe your minimum monthly payments just aren't enough to make
the kind of dent in your debt that you'd like, or maybe you got hit
with an interest rate that's just too high. Switch your balance to a
new, lower interest rate card researched by
Credit-card-savings-calculator.com to bring your debt down to a
manageable amount. Balance transfer credit card rates are averaging
between 10.19% and 20.9%, offering customers 0% introductory rates
and no annual fees. These perks can give you the added advantage of
more aggressively attacking your debt during these times. In
addition, many cards offer additional incentives such as discounts on
travel and merchandise, road-side assistance or cash back deals.
Switching your existing balance to a lower rate card mean that your
monthly payments mean more as time goes on.

Understanding
Introductory Rates

One
of the easiest ways to save money is to look for introductory rates
on new cards. If you understand how to best utilize these offers you
can easily come closer to paying off debt in a timely fashion. While
using credit cards isn't an ideal way to cut back on debt, there are
ways you can save if you know how to make it work for you.

Most
credit card companies will offer introductory rates on balance
transfers when you open a new account. This means you can move debt
from a higher interest card to a card with a much lower rate.
Introductory rates can range from 0%-15% for anywhere from 3 months
to a year. There is a trick to paying off debt with this option. Take
your highest balance card and look for a good introductory rate. Pay
attention to the terms. If the rate is only good for 6 months, you
need to figure out how much you could feasibly pay in that time
frame. This is where using a monthly payment calculator is going to
come in handy. Lets look at an example.

If
you have a credit card with a $2,000 balance and an 18% interest
rate, you would have to pay almost $200 a month including compound
interest to have it paid off in a year. Using credit cards with a 0%
introductory rate would slash that payment down to $166 a month for
12 months. Over the course of a year you would save over $300. You
can use a monthly payment calculator to figure out how much you can
save by switching to a credit card with a decent balance transfer
introductory rate.

Balance
Transfer Fees

Transferring
a balance to a lower rate credit card isn't always free. When you
start looking for cards that can save you money you want to pay
attention to the balance transfer fee associated with it. These can
vary greatly from card to card. Some cards may have a capped flat
amount they charge, while others charge a certain percentage of the
overall balance. It's not uncommon for these fees to be as high as
5%. This may not sound like a lot at first, but when you're looking
at transferring high dollar amounts it can add up. A credit card that
charges 5% without a cap on a balance transfer of $10,000 will cost
you a whopping $500. In these cases it may be better to find a card
that has a slightly higher interest rate than it is to pay that fee.
As an example, if you transfer that $10,000 balance to a card with a
3% introductory rate for balance transfers, the overall interest on
that would be around $300, less than the 5% rate. If you are faced
with choosing between a 0% rate with a 5% fee or a 3% interest rate
with no fee, the best choice is actually going to be the higher
interest card. If you don't want to do the math by hand, keep the
monthly payment calculator open while you search.

Fixed
Versus Variable Rates

It's
pretty uncommon to find variable interest rates on balance transfers,
but they do exist. You want to watch for these for a few reasons.
Variable rates can be difficult to keep up with, and confusing to
understand. The variable rate simply means the credit card company is
charging a rate over the prime rate. The prime rate is determined by
the U.S. Prime Rate as published each month. Most credit card
companies will base the rate on the published rate as determined by
the Wall Street Journal. The prime rate in the past decade has
fluctuated wildly, ranging from 3.25% to 9.5%.

The
credit card company will charge a rate above that. It will usually be
somewhere between 1 and 8 points above. You'll see something that
looks like "Prime + 3.99%" for variable rates. When the
prime is low, this is a good way to save money. However, you don't
know from month to month what's going to happen with this rate, so it
can be risky to transfer a balance to one of these cards. You're much
better off getting a fixed rate even if it's higher at the time than
prime. A flat 6.99% rate is much more reliable than a variable rate,
especially for a balance transfer.

Perks
and Points

When
you're looking to save money there may be some hidden perks that can
save you money too. For instance, if you choose a card that offers
frequent flyer miles with purchases and balance transfers, and you're
a frequent traveler, you can enjoy getting points just for the
transfer. Many cards have reward programs that will entitle you to a
variety of savings. Look for cards that most closely match your
lifestyle and check to see what kind of perks they offer for balance
transfers to save the most money.